In the spring of 2011, an Arizona think tank was celebrating what it billed as a landmark victory for school choice: The Legislature had passed a bill making it legal to give tax dollars to families with special-needs students, which they could use to pay private-school tuition.

The Goldwater Institute wasn't cheering from the sidelines. It had developed the idea for Empowerment Scholarship Accounts and had helped convince lawmakers to make it state law.

"The Arizona Legislature became the first in the country to approve (Empowerment Scholarship Accounts), an idea born at the Goldwater Institute," a Goldwater official told supporters in a celebratory email. "ESAs have the potential to create a truly 21st century system of public education, in which every child is empowered to pursue the best possible schooling without stifling and costly bureaucracy and special-interest pressures."

But Goldwater — itself a conservative special interest that's not required to reveal its financial supporters — was only beginning its own campaign to pressure state officials on the school-voucher policy. Those efforts culminated this year in the controversial expansion of the ESA program to all Arizona public school students.

Emails obtained by The Arizona Republic show the extent to which Goldwater — a tax-exempt organization that touts its use of lobbying and lawsuits to block government regulation on a variety of issues — attempted to dictate to the state’s Education Department how the program should be implemented, acting as if it retained ownership of it even after it became state law.

'Iron grip-level of influence'

The Empowerment Scholarship Account program allocates to qualifying families 90 percent of the state money that would otherwise have been given to the district school or charter school previously attended by the student.(Photo: The Republic)

The group's education director at the time sought to determine how often funds would be distributed to parents, what parents would be allowed to buy with that money, and even how the Education Department would advertise the program. Goldwater's education director and a lobbyist for an allied non-profit group requested the department issue a news release about the ESA expansion, which the lobbyist, her colleague, and the Goldwater education director helped draft and edit, the emails show. And Goldwater's education director sought to place an intern from the non-profit into the Education Department to work on the ESA program.

Later, when parents had problems with the debit cards used to distribute ESA funds, Goldwater representatives acted as go-betweens to resolve the problems.

“This is almost an iron grip-level of influence from the beginning of the process on.”

Special interests often write concepts for legislation or offer drafted bills and then lobby lawmakers to pass them. But Goldwater’s attempts to exert control over the Empowerment Scholarship Account program, from idea to implementation, was highly unusual if not unprecedented, experts say.

“This is almost an iron grip-level of influence from the beginning of the process on,” said Thomas Holyoke, an associate professor of political science at California State University-Fresno, who studies interest groups and lobbying.

“This sounds like a full-service operation; it wasn’t just writing the legislation,” he added. “You have elected officials, who are supposed to be repositories of the public’s trust, who are pushing legislation and probably building careers off of big, high-profile bills that have some potentially extremely far-reaching effects.”

The Goldwater Institute defended its interactions with education officials as chronicled in the emails, saying it reveals the group’s efforts to expand families' educational opportunities. Jonathan Butcher, the group's then-education director and a senior fellow at Goldwater who communicated extensively with the Education Department about the program, said state officials were free to ignore the group’s advice.

Former state schools Superintendent John Huppenthal, who sees school choice as Arizona’s “salvation,” said he can recall Education Department staff complaining on only one occasion that Goldwater was too aggressive in its efforts to influence the program.

“I just viewed them as acting as an agent for all those people that were in the program, just the same way I would deal with a lawyer or someone acting on behalf of a client,” said Huppenthal, who was state superintendent from 2011 to 2015. “They weren’t charging these people anything. So to me, it was a labor of love for them.”

Top aides to current school Superintendent Diane Douglas described the emails as a “regular back and forth” between stakeholder groups and the department. Michael Bradley, Douglas’ chief of staff, had not read the emails but described Goldwater's communications as routine.

Establishing the program

A student with an Empowerment Scholarship Account attends a musical therapy session at Musical Surprise in 2016.(Photo: The Republic)

Empowerment Scholarship Accounts were initially offered to families with students who have special needs, granting them as much as an estimated $30,000 to pay for private-school tuition, tutoring and other services. Lawmakers then expanded it to include, among others, students in poor-performing schools and those from military families.

This year, the Legislature made all public school students eligible to apply for ESAs,opening the door to what could be a seismic shift in K-12 education in Arizona. But a referendum has put the expansion on hold until voters decide whether the state should move ahead.

The latest expansion cleared the Legislature at the urging of Gov. Doug Ducey, the American Federation for Children, which was founded by now-U.S. Education Secretary Betsy DeVos, and the Center for Arizona Policy, which is best known for pushing legislation to regulate abortions.

About 4,147 students are currently enrolled in the program, at a cost of about $55 million.

State public school spending, meanwhile, averages about $3,680 per student. The cost can increase significantly for students with special needs, like many of those in the ESA program.

Critics have cast doubt on the level of public support for the ever-expanding ESA program, which they say starves public schools of funding to the benefit of private and religious education. It wasn't created in response to some clamor from the public, they say, but is part of a broader anti-public schools agenda driven by conservative groups. Critics also correctly note it is largely unaccountable to taxpayers in how the money is spent, as well as academic performance.

To get a fuller picture of the Goldwater Institute’s influence over the controversial program, The Republic obtained the non-profit’s ESA-related email communication with the Education Department from 2011, the year the program was created, through June 2017, weeks after lawmakers expanded it to all Arizona students.

Butcher, Goldwater’s then-education director, is at the center of the early communication, which began landing in state education officials’ inboxes in late January 2011. Butcher was soon asking education officials to review drafts of Goldwater reports on the ESA program and send him ideas. It was the first of several requests for state employees to perform work benefiting Goldwater.

Butcher also offered the department ideas on how the Legislature could alter the program and market it.

When parents had problems with the ESA debit cards or spending rules, Butcher insisted on acting as a go-between for state education officials.

“Would it be possible to provide the parent names so I am able to contact them directly and address their concerns?” an Education Department staffer asked Butcher.

He replied, “... The parents have asked us to help them see this through.”

Goldwater wanted the program implemented with few restrictions on how the money could be spent. It also wanted more allies inside the department.

Eight months after lawmakers created the program, Butcher asked if the superintendent’s office or staff working on the ESA program needed an intern. Butcher said he had someone “I can recommend who’s done great work here.” It is unclear if the individual ended up in the department.

Staffers expressed concerns in the emails about parents depositing ESA money in college savings accounts, saying it would make the program vulnerable to fraud.

Butcher challenged them: “Why would you need to see what happens after the money is deposited in a 529?” he asks, referring to the tax-exempt college savings accounts. “Isn’t there a really stiff tax penalty if you don’t use it for college or is it completely locked up for college expenses?”

The employee replies, “529’s can be pulled out with a penalty at anytime and used as cash.”

It was later revealed that some parents had deposited all of their allotted ESA money into college-savings accounts and exited the program, leaving state officials unable to recoup the money.

A 2016 state audit found the lack of regulation allowed more than $102,000 in ESA funds to be misspent during a six-month period. Parents bought items not allowed by the program, such as snow globes and sock monkeys, and kept ESA money even after enrolling their kids in public school, auditors found. In 2014, a payment to a health clinic led education officials to conclude ESA money had been used to pay for an abortion.

‘Just about done’

About 4,147 students are currently enrolled in the Empowerment Scholarship Acount program, at a cost of about $55 million.(Photo: The Republic)

Goldwater was at the table with lawmakers as they discussed expanding ESAs.

It hosted meetings with private school leaders to answer questions about it. And its website, askamomaz.com, put the group at the forefront of soliciting enrollment, while frustrated state officials said Goldwater was misleading parents about the program.

By 2014, the department’s director of legal services and data privacy officer wrote a colleague she was “just about done” with Butcher.

If the Education Department did not bend to Goldwater’s will — or took a “Goldwater be damned approach” — ex-staffers said the department risked retribution from lawmakers who could “impose some pretty draconian requirements” on the department.

Whether out of necessity or expediency, the Education Department largely cooperated with Goldwater, the correspondence shows.

When Butcher requested financial information about the ESA program, the Education Department noted it “expended the resources of an intern for about 200 hours to create a custom, anonymized set for Goldwater.”

The Republic requested similar information in 2016, and found state officials were far less cooperative, initially telling the newspaper it would require too much staff time to compile. They then said privacy laws prohibited them from providing complete information.

In an interview with The Republic, Butcher said his communication with the Education Department illustrates Goldwater’s desire to give students access to a quality education.

“Our role as a government watchdog is to give policy advice based in evidence as best we can, so that was the intent,” said Butcher, now a senior fellow at Goldwater and senior policy analyst with the Heritage Foundation.

Goldwater wanted “the best for the families who want to participate and are participating,” he said.

Asked whether his demands of the department reflected undue influence over state government, Butcher said, “The agency is free to take our advice or not, and ultimately the same with bill sponsors and members of the Legislature.”

National ambitions

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Everything you need to know about the Empowerment Scholarship Account program in Arizona.
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The Goldwater Institute opened its doors in the late 1980s, and soon became a driving force in Arizona’s charter-school movement and in offering other alternatives to public education, such as the ESA program.

Dozens of states have since adopted Goldwater policy on a range of issues.

Goldwater’s ambition to"brand" and spread ESAs beyond Arizona was evident in a message to Education Department officials asking for feedback on “how other states could adopt ESAs.” In the message, Butcher refers to the program as “Education Savings Accounts.”

To which Butcher replies: “I’ll ... make sure it says Empowerment Scholarship Accounts when referring to Arizona, but as we brand this as an idea for other states, I need to use education savings accounts (It was really a marketing decision, didn’t have much to do with me.)”

Lisa Graves, a former deputy assistant attorney general in the Clinton administration, said groups like Goldwater succeed in spreading their ideas because they access funding and expertise beyond the reach of everyday citizens. Graves heads the Center for Media and Democracy, which investigates the activities of conservative political non-profits.

Goldwater, which as a non-profit is not required to disclose the sources of its funding, took in about $4.3 million in 2015 and spent about $5.6 million on salaries, legal expenses, advertising, lobbying, fundraising and other expenses, according to the group’s most recent disclosures.

Graves said elected officials increasingly allow special-interest groups with which they’re ideologically aligned greater say in policymaking — far more than the voters who elect them.

Graves said Goldwater’s communication with state officials shows “the taking away (of) the power of ordinary people to influence policy, and to really, truly have oversight of programs that are being pushed by these really, very narrow special interests.”

Concern over enrollment

The email was accompanied by a document with a file (“092211-Changes-to-ESA-Lawsydneyhay-edits.doc”) incorporating the name of a lobbyist for the American Federation for Children, Sydney Hay. The non-profit founded by DeVos is funded by anonymous “dark-money” donations.

Goldwater and the federation had joined forces to expand Arizona’s ESA program beyond students with special needs.

After the Legislature approved the expansion, Goldwater and the federation urged the Education Department to publicize it in a news release. It would attract more media attention coming from state government, Hay said.

“If the Superintendent sends out a release it is more likely to get covered than if we do it,” Hay wrote an email to the Education Department spokeswoman. The spokeswoman asked for parents to quote and Goldwater was looped into the conversation.

Hay ultimately signed off on the department news release writing in an email: “Perfect by me! THANK YOU FOR YOUR HARD WORK ON THIS!”

Kim Martinez, a spokeswoman for the federation, declined to be interviewed for this article. In an email she wrote that it was unnecessary “to explain our diligence in fighting for disadvantaged Arizona families.”

“Our involvement is in line with many other organizations who are stakeholders in the implementation of other important Arizona programs and laws,” Martinez wrote. “Almost any state agency from the Arizona Department of Environmental Quality to the Arizona Department of Transportation and the Arizona Corporation Commission all work with non-profit organizations in order to make state programs they administer work better for Arizonans.”

By 2013, the groups were confronting a daunting problem: how to boost enrollment in a program that they had sold to lawmakers as extremely popular with parents.

In March of that year, Butcher wrote to the chief of staff of then-state Superintendent John Huppenthal to inform him applications to school-choice programs in Indiana and Louisiana were “through the roof.”

Hay wrote she had learned during a conference call with other school-choice advocates that 12,000 parents had applied for Louisiana’s program.

Her “report that less than 1,000 (Arizona families) have applied for ESAs was dismaying to the group,” she wrote. “... Something isn’t working. We want to help. This is a rather urgent matter.”

Hay asked the department to “Please extend the deadline” to apply for the ESA program. The deadline was not extended.

"I have great news for you. I want you to know about a state program that provides money for parents to offer alternative education choices for their child, including private school. That's right. You may be able to send your child to private school for free."

The call directed interested families to a Goldwater Institute website.

Huppenthal told The Republic that Hay asked him to record the call.

The call also sparked a public backlash against the ESA program, which until then had not gotten much attention outside the state Capitol and education circles.

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'Running it from the inside'

Goldwater lost a key ally in the Education Department when Huppenthal left office in 2015. (Douglas defeated him in the 2014 Republican primary.) The group’s emails to the department came less frequently and, at times, were less friendly.

Goldwater’s then-attorney and executive vice president asked Douglas to end some procedures regulating how ESA money can be spent, saying in a December 2016 email that they limited parents’ choices and appeared to violate administrative rules. The department changed some of its procedures.

Goldwater also supported legislation to severely limit the department’s oversight of ESAs.

Asked Douglas’ view of Goldwater’s influence over the ESA program, her chief of staff, Bradley, said, “I think that she’s concerned with the overall influence that they might have on the Legislature and on the Executive Branch, but that our own department ... is pretty much immune to that.” Douglas has immunized herself, in part, by using public campaign financing and not seeking endorsements, he said.

This year, Goldwater also asked the Arizona Attorney General's Office to review the department’s handling of ESA applications. Bradley viewed it as an aggressive move against the department.

But cordial relations with the Education Department had become less crucial for Goldwater: High-profile officials with ties to the Goldwater Institute were in key positions at the state Capitol or moving through thegovernment-lobbyist revolving door.

Ducey tapped Victor Riches, a Goldwater lobbyist, as his deputy chief of staff for policy and budget when he took office in 2015. Riches has since left the Governor’s Office and is president and CEO of the Goldwater Institute.

In 2016, incoming GOP Speaker of the House J.D. Mesnard named as his chief of staff Goldwater’s vice president for state and fiscal affairs, who months earlier had pressed lawmakers to expand the ESA program to all public school students.

Meanwhile, opposition to the ESA program has grown louder and more organized.

The pending Save Our Schools Arizona referendum is widely seen as a rebuke of Goldwater and its well-placed allies, who until now have not faced formidable opposition.

In making their case to voters, opponents of the ESA expansion have focused on the few special-interest groups they say have more sway over education policy in Arizona than the many parents who send their kids to public schools.

Dawn Penich Thacker, spokeswoman for the group behind the referendum, said, "Most average voters, certainly people we worked with through (Save Our Schools Arizona), would be extremely concerned that it appears special interests ... don’t just influence our state government, but they are running it from the inside.”

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